Market participants are speculating what exactly the European Central Bank (ECB) has in their “whatever it takes” toolbox. ECB President Mario Draghi commented that if the euro continued to climb, the ascent would trigger more monetary stimulus. The euro is up 5.88 percent against the US dollar.
Draghi said that “the strengthening of the exchange rate would require, to make our monetary policy stance to remain equally accommodative, it would require further monetary policy accommodation.” But, how high is too high? The EURUSD was only 34 pips away from 1.4000, and Draghi did nothing.
Draghi expresses worry over the euro’s appreciation, but the central bank has probably been the least active out of the world’s largest. The increasing euro will continue to increase worries about the eurozone’s lowering inflation because it makes exports less competitive and cheapens import prices. Draghi said “I’ve always said that the exchange rate is not a policy target, but it’s important for price stability and growth.”
EURUSD seen a large bump higher after reaching the 30-day low of 1.3672. Price action on the 4H chart has respected the ascending trend line, but the closing candle on Friday resembles a bearish engulfing. Price action did cluster around 1.3900 and was unable to close above this key resistance level. EURUSD will be additional resistance at 1.3915 and 1.3942. Support lies at 1.3880 and 1.3860. The EURUSD would break the uptrend if secondary support is broken.
The momentum, intraday, is stagnating with both the ADX and + DMI ticking downwards. However, the – DMI is not ticking upwards just yet. This could mean the bulls are still in control.